ACIT Vs Abans Jewels Limited (ITAT Mumbai Bench)
Suspicion Cannot Mint Commission: 0.25% Ad Hoc Addition on Alleged Bogus Purchases Deleted
Summary: A survey u/s 133A was conducted in the Abans Group on 3 December 2019. Based upon information subsequently received from the Investigation Wing regarding certain entities from whom purchases had been made, the assessment of Abans Jewels Ltd. was reopened u/s 147. The assessee was engaged in manufacturing refined gold bars & trading in gold coins, gold chains, silver and other commodities.
During the reassessment proceedings, the AO examined purchases aggregating to ₹481.05 crore made from four entities, namely Asterpetal Trade & Services Pvt. Ltd., Mavaiya Enterprises Pvt. Ltd., Trishna Trading Services Pvt. Ltd. & Yogdarshan Commercial Trading Pvt. Ltd. According to the AO, these entities were not genuine and the purchases were not independently verifiable.
Significantly, however, the AO did not disallow the purchases themselves. He acknowledged that there could not be sales without corresponding purchases, but concluded that the transactions recorded in the books did not reflect the assessee’s true profits. Referring to the alleged prevailing market practice in accommodation-entry transactions, the AO estimated additional income by applying an ad hoc commission rate of 0.25% to the purchases. This resulted in an addition of ₹1,20,26,306.
